Leaving the E.U. Would Hurt Britain’s Economy

Would Britain be better off economically outside the European Union? The answer is most likely no, which is why Britons need to weigh the evidence carefully when they go to the polls in June to vote on leaving the E.U.

Proponents of an exit criticize the union for taking too much power away from member nations and for issuing unnecessary and excessive regulations. This, the argument goes, has hurt Britain’s economy. But the data does not back that up. It is far from clear that leaving would lead to faster growth and better living standards. In fact, it could have the opposite effect.

If E.U. regulations were as onerous as British critics say, those rules would hurt all 28 member countries. Yet the economies of other members like Germany, the Netherlands and Ireland have been more productive than Britain. Those countries had a gross domestic product per hour worked that was nearly the same as the United States in 2014, while Britain’s comparable figure was much lower, according to the Organization for Economic Cooperation and Development.

If Britain left the E.U. it would have to replace the union’s rules with its own regulations in areas like the environment, banking and social services. It is improbable that when it came down to specific rules, the British public would want the risks that come with a more laissez-faire approach. In some areas like policies to reduce greenhouse gases, British regulations are already tougher than those of the E.U., according to an analysis by Open Europe, a London-based research group.

Supporters of an exit argue that Britain would be able to maintain an open market with the union, its biggest trading partner. But that seems like wishful thinking. The E.U. would have no obligation to continue giving Britain tariff-free access to its market without securing big concessions in return. For example, Norway, which is not a member, pays the E.U. a fee and abides by most of its regulations to get access to its market.

As far as trading with the rest of the world, Britain would most likely be worse off on its own. The European Union has trade agreements with countries that account for 60 percent of Britain’s trade, according to Open Europe. Britain would probably have to negotiate new pacts with those countries, and the terms would very likely be less favorable than those secured by the E.U. The union, after all, is the world’s largest economy with a G.D.P. of $18.5 trillion in 2014; Britain’s G.D.P. was $3 trillion. For the United States, which is negotiating a trade agreement with the E.U., a pact with Britain would no doubt be a lower priority.

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Investors are clearly worried about Britain’s economic prospects if it leaves, which is why the pound has depreciated against the dollar in recent months. One pound was $1.42 on Friday, down from $1.53 six months earlier. Global businesses with a big presence in Britain are particularly concerned. An exit could prompt banks and large corporations to move parts of their operations from London to other European cities so they could continue doing business in E.U. countries without any disruptions.

Supporters of an exit say British taxpayers would save about 10 billion pounds ($13.9 billion) a year if they no longer had to contribute to the E.U. budget. That is overstated, because Britain would have to spend more on the government functions that are now handled by the E.U. Besides, that sum amounts to just 1.3 percent of the government’s total budgeted spending for its current fiscal year.

Ultimately, separating from the union is highly unlikely to yield the economic bounty supporters have promised and it would leave Britain more isolated and probably poorer.